Pelosi denies insider trading allegations

Published 8:55 pm, Monday, November 14, 2011

House Minority Leader Nancy Pelosi, D-Calif., talks to reporters to caution the deficit reduction supercommittee about not using retirement benefits to fix the nation's debt problems, Thursday, Oct. 27, 2011, on Capitol Hill in Washington. (AP Photo/J. Scott Applewhite) less

House Minority Leader Nancy Pelosi, D-Calif., talks to reporters to caution the deficit reduction supercommittee about not using retirement benefits to fix the nation's debt problems, Thursday, Oct. 27, 2011, ... more

Photo: J. Scott Applewhite

Pelosi denies insider trading allegations

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WASHINGTON - House Minority Leader Nancy Pelosi's office accused the CBS news program 60 Minutes of omitting key information from its report Sunday on how members of Congress use privileged information to profit from stock trades.

Pelosi spokesman Drew Hammill also called the report "a right-wing smear" based on a new book by conservative author Peter Schweizer of the Hoover Institution, a think tank based at Stanford University. The book is titled: Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Jail

In an interview Monday, Schweizer said the "most egregious" allegations of insider trading concerned Bachus. At the height of the 2008 financial panic, Bachus participated in private briefings by Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson warning that the financial system was about to collapse.

A 'temptation'

The next day, 60 Minutes reported Sunday, Bachus bought a stock fund designed to rise in value when the market sank.

Studies led by Georgia State University Professor Alan Ziobrowski found that stock portfolios of U.S. senators beat the market by 12 percent annually and House members by about 6 percent, returns he called abnormal.

"There is no law that says a congressman can't go into the cloakroom, hear some information that is about to have an important impact on a company and then, before it becomes public, go right to his stockbroker and trade," Ziobrowski said. "It is a tremendous temptation."

The 60 Minutes segment suggested Pelosi had a conflict of interest because she and her investor husband, Paul Pelosi, bought stock in Visa, the credit card company based in San Francisco, in March 2008 while a bill that would limit the fees credit card companies could charge companies was pending in the House.

The Pelosis bought Visa stock three times: 5,000 shares at $44 each in an initial public offering March 18, 2008; 10,000 shares after the IPO at $64 on March 25, and 5,000 shares at $86 on June 4.

The credit card fees bill, by then-House Judiciary Committee chairman John Conyers, D-Mich., passed his committee on Oct. 3, 2008, but did not reach the full House. Pelosi was speaker at the time and controlled which legislation came to the floor.

Pelosi's office said Monday that 60 Minutes should have reported that Oct. 3, 2008, was the same day the House was voting on the bank bailout known as the Troubled Assets Relief Program, amid a crisis atmosphere on the last regular day the House was in session. Its leaders were trying to round up votes for the bank rescue.

The month before, Pelosi led House passage of the Credit Cardholders Bill of Rights, a bill also considered hostile to the industry. It was opposed by the Bush administration and died in the Senate, but was enacted in 2009.

A version of the Con-yers fee limit became law in 2009 as part of a larger regulatory overhaul.

Pelosi spokesman Hammill said 60 Minutes relied heavily on a "discredited conservative author who has made a career out of attacking Democrats," citing Schweizer books such as Do as I Say (Not as I Do): Profiles in Liberal Hypocrisy

Schweizer accused Pelosi of trying to shoot the messenger rather than address stock trading by members of Congress.

"The issue is what the facts say and whether people think there's a problem with a senior member of Congress, whoever they are, taking IPO shares of corporations that have legislation sitting in front of them," Schweizer said.

Legislation forming

A bill by Rep. Louise Slaughter, D-N.Y., called the Stop Trading on Congressional Knowledge Act, or STOCK, would ban congressional insider trading. It had just nine sponsors until Monday, when six more joined.

Donna Nagy, an Indiana University law professor, said members of Congress could be prosecuted under current Securities and Exchange Commission rules if they commit fraud involving violation of a fiduciary trust or silence about relevant non-public information.

"I would argue, and I would hope the government would argue, that the federal government and its citizens are defrauded and deceived if a member of Congress trades securities on the basis of material non-public Congressional knowledge," Nagy said.

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